THE PLATINUM SECURITY PLAN ©

A BLEND OF
LOAN REGIME SPLIT DOLLAR AND 457(F)

Non profit organizations use 457(f) plans and loan regime split dollar plans to retain and attract top talent. Recently, the loan regime split dollar plans has become the popular choice.

The loan regime split dollar plans, however, do have challenges:

Longevity risk of the plan. A typical design has the loan repaid from the death proceeds, which can be decades after a participant leaves the organization.

Denial of plan distributions. If a distribution from the policy jeopardizes it’s ability to repay the organization, the organization can deny a distribution. The policy has a collateral assignment, using the policy as collateral for the loan.

Complicated if participant leaves the organization partially vested. What does partial vesting really mean? Partially vested in what?

Loan repayment. The loan can be paid off at any time, which means, another organization can pay off the loan, and the policy can be collaterally assigned to the new organization to secure the loan. If this is the case, how is loan regime split dollar a retention plan?